The market has a history of testing new Federal Reserve chairs. There have been 6 Fed chairs sworn in since the was constructed, and the market has experienced a 20%+ drawdown within the 1st year in 4 of those 6 occasions.
On average, the pain has come within the 3-6 month window, with the averages skewed due to the ’87 crash that began the Greenspan era. Which may have had nothing to do with him.
Although there was a 20% drawdown during Powell’s first year, the last 3 Fed chairs have experienced less stock market volatility compared to their predecessors.
Market returns 12 months out are relatively close to the historical average.
As new Fed chair Kevin Warsh gets sworn in today, the market will be looking for clarity on policy, inflation, and the Fed’s balance sheet. Don’t be surprised to see the market throw a tantrum or two before the smoke clears.
Fortunately for Mr. Warsh, his timing is extremely beneficial. Real GDP estimates for Q2 just got raised to 4.3%, getting very close to a 5 year high.
EPS growth is now 29% in Q1 now that 94% of companies have reported results. And estimates are for 20%+ growth in each quarter for the rest of this year. I’m not sure there has ever been a sustained period of EPS growth like this. This is where the late 90’s comparisons end.
Speaking of earnings growth. Why has ’s stock price not been reacting well post-earnings? On the surface, it doesn’t make a lot of sense. The growth rates are superb and they consistently beat their EPS and sales estimates.
We can debate the finer details but I prefer to keep it simple. The company is phenomenal but EVERYONE knows this by now.
Nvidia just reported EPS results that were 3.9% above street estimates. But the market average for Q1 is approximately 8.2%.
In other words, Nvidia failed to beat its estimates by an amount greater than the market average. And they’ve posted beats that have failed to keep up with the market average in 3 of the last 4 quarters. And 5 of the last 8 quarters.
The biggest stock moves come when it takes everyone by surprise. Such as what is going on in some of the semis lately and what happened in Nvidia when ChatGPT first became a thing.
It’s still the best company in the world. No need to overthink this.